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Press release from Marketwire

Migao Reports Second Quarter, Fiscal 2011 Financial Results

Friday, November 12, 2010

Migao Reports Second Quarter, Fiscal 2011 Financial Results07:00 EST Friday, November 12, 2010TORONTO, ONTARIO--(Marketwire - Nov. 12, 2010) - Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported financial results for the three and six-month periods ended September 30, 2010. Migao reported revenues of $68.5 million (RMB 445.9 million) for the 3-months ended September 30, 2010 as compared to revenues of $67.7 million (RMB 421.3 million) for the three-month period ended September 30, 2009, representing an increase, in RMB sales of 5.8%. For the six months ended September 30, 2010, revenue increased to $134.7 million (RMB 885.9 million) compared to $126.6 million (RMB 766.1) in the first half of fiscal 2010, representing an increase, in RMB sales of 15.6%. For the quarter, the Company reported net income of $8.3 million or $0.16 per basic share as compared to net income of $9.6 million or $0.21 per basic share for the same quarter last year. The net income decline is attributed to increased selling and general and administrative costs as well as a higher effective tax rate. Net income per share was further impacted by an increase of shares outstanding due to the bought deal public financing, which occurred on December 10, 2009.SUMMARY FINANCIAL STATEMENTS3 months ended September 30, 20103 months ended September 30, 2009($'000)Sales68,45567,684Gross Profit16,28614,349Gross Profit (% of revenue)23.8%21.2%Net Income8,2989,598EBITDA12,44812,262Basic EPS0.160.21Diluted EPS0.160.20Weighted average number of shares (in millions of shares)Basic52.246.5Diluted52.646.9Balance Sheet Highlights($'000)September 30, 2010March 31, 2010Current ratio3.28:13.52:1Cash87,80160,221Net Cash37,32518,790Working Capital210,654189,451Total Assets388,728343,976Total Debt92,41775,470Total Equity296,230268,506Long Term Bank Debt to Equity Ratio0:10:1"We are very pleased with our operations during the quarter. The period covering July to September is typically not an intense fertilizer-application period, however we continued to experience strong demand from our high-value crop customers, and as such we operated at full production capacity selling all of our core fertilizer products once again," said Mr. Liu Guocai, President and CEO of Migao. "The current quarter will see revenue pickup from our specialty compound fertilizer product as well as from expected increased selling prices from our core fertilizers. The second half of the year is looking very promising with selling prices and revenue improving from seasonal demand improvements, global fertilizer prices moving up, and increased production." Migao's gross profit margin was 23.8% of revenue for the second quarter, in line with the targeted 22-24% range. Gross margin for the first half of fiscal 2011 remained strong at 25.1% as a result of well-timed raw material purchases, ahead of the stable and improving pricing environment in China for the Company's core products. EBITDA for the second quarter of fiscal 2011 increased to $12.5 million versus $12.3 million for the same period last year. Currently Migao produces 420,000 tonnes annually of combined core products and specialty compound fertilizers. Announced projects under construction will bring online an additional 100,000 tonnes of core product capacity by the end of calendar 2011. Specifically, the additional capacity comes from a 40,000 tonne per year potassium sulphate facility near Shanghai and a 40,000 tonne per year potassium nitrate facility, which is near completion through a 50/50 joint venture with Chile's SQM at the Sichuan Migao property. In addition, a 40,000 tonne per year potassium sulphate facility will be added to the Changchun Migao site.At the end of the period, the Company had $63.9 million (188,051 tonnes) of potassium chloride inventory with an average delivered price of $340 per tonne, of which 59,050 tonnes were on hand with the remainder being in transit. In addition, during the quarter, the Company sold 24,593 tonnes of potassium nitrate, 82,285 tonnes of potassium sulphate, 20,269 tonnes of potassium chloride, and at the end of the period, the Company had $6.5 million (43,747 tonnes) of finished goods inventory on hand, including co-products. At September 30, 2010, Migao reported cash of $87.8 million and working capital of $210.7 million. Conference CallMigao will be hosting a conference call to discuss the year-end results at 10:00am, Eastern Time, Friday November 12, 2010. The details are as follows:Dial in number: 416-340-2218 or 1-866-226-1793Taped replay (until November 26, 2010): 416-695-5800 or 1-800-408-3053Taped replay access code: 8557577#About Migao Migao Corporation, through its wholly owned subsidiaries, owns and operates fertilizer production plants in various strategic locations across China for the production and sale of specialty potash fertilizer (potassium nitrate and potassium sulphate) to China's agricultural market. Migao Corporation is subject to, and complies with strict government regulations that govern safety, quality and environmental protection. Migao's Sichuan facility is ISO 14001 certified, an international environmental management standard. Please visit www.migaocorp.com for further information.CAUTION REGARDING FORWARD-LOOKING STATEMENTS This news release may include forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities laws in Canada. These forward-looking statements include, among others, statements with respect to our objectives and goals, and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective", and "continue" (or the negative or grammatical variations thereof), and words and expressions of similar meaning, are intended to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results, performance or achievements may differ materially from those expressed or implied in such statements. We caution readers not to place undue reliance on forward-looking statements as a number of important factors, many of which are beyond our control, could cause actual results, performance or achievements to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors that relate to our company include, but are not limited to: risks related to raw materials; execution of the business plan; expansion plans; dependence on key personnel; key relationships; dependence on key customers; dependence on key suppliers; competition; market factors and volatility of commodity prices; environmental risks and hazards; operating risks; proprietary rights; infrastructure; future capital requirements; technical substitution; exchange rate fluctuations; insurance; foreign operations; tobacco industry considerations; weather conditions and natural disasters; control by management; seasonality; dividends; conflicts of interest; global financial conditions; and the implementation of the Labour Contract Law in the People's Republic of China in 2008. In addition to the foregoing risk factors, there are also risks related to doing business in China which include, but are not limited to: state ownership; government sector intervention; foreign investment; repatriation of profit and currency conversion; tax; shareholders' rights and enforcement of judgements; developing legal system; protection of intellectual property rights; permits and business licenses; appropriation; and availability of land. Should one or more of these factors materialize, or should our estimates or underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from those described in forward-looking statements.We caution that the foregoing list of important factors that may affect our future results, performance or achievements is not exhaustive. When reviewing our forward-looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found under the "Risk Factors" sections in our Annual Information Form and annual MD&A and elsewhere in our filings with Canadian securities regulatory authorities. Except as required by Canadian securities laws, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. We cannot assure readers that actual results, performance and achievements will be consistent with these forward-looking statements, and the differences may be material. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.To be added to Migao's email distribution list for news releases or to be removed from the list, please send a request to info@migaocorp.com. FOR FURTHER INFORMATION PLEASE CONTACT: Jay HusseyMigao CorporationVice President Corporate Finance416-869-1108 ext. 104jay.hussey@migaocorp.comORRandall SmallboneMigao CorporationChief Financial Officer416-869-1108 ext. 103randall.smallbone@migaocorp.com